Affin Hwang IB noted that Indonesia remained a key swing factor in the global palm oil market.
PETALING JAYA: Earnings in the plantation sector are expected to contract by 5.6% year‑on‑year in 2026, following an estimated 15.6% increase in 2025, according to Affin Hwang Investment Bank Research (Affin Hwang IB).
The revision reflects the research house’s lower crude palm oil (CPO) average selling price (ASP) assumptions, alongside updated fresh fruit bunch and CPO production estimates for several plantation companies that have released their full‑year 2025 results on Bursa Malaysia.
Core net profit forecasts, ratings and target prices have also been adjusted.
In a note to clients, Affin Hwang IB said it cut its CPO ASP assumptions for 2026 to RM4,100 to RM4,250 per tonne, and for 2027 to RM4,250 to RM4,400 per tonne.
The downward revision is mainly attributed to the delay in Indonesia’s B50 biodiesel mandate.
Following the announcement of the B50 delay, CPO prices briefly dipped below RM4,000 per tonne, before rebounding to hover around RM4,100.
“We believe CPO prices are currently supported by expectations of declining production in the first quarter of 2026 due to the monsoon season, as well as stronger demand ahead of the Lunar New Year and the start of Ramadan in February,” the research house said.
Affin Hwang IB noted that Indonesia remained a key swing factor in the global palm oil market.
This is given its dominance in production, consumption and policy‑driven demand.
Additionally, the implementation of the B4 blending mandate also removes a potential near‑term upside catalyst for CPO demand.
To sustain biodiesel subsidies, Indonesia plans to raise CPO export levies to 12.5% from March 2026, alongside higher levies on refined products.
Furthermore, the country has intensified enforcement against allegedly illegal land use.
As at the end of 2025, about 4.1 million tonnes of palm oil land had reportedly been seized, with further confiscations possible in 2026.
While such supply disruptions could offer short‑term support to CPO prices, Affin Hwang IB warned that land seizures significantly weaken earnings visibility, heighten regulatory uncertainty and increase environmental, social and governance, and reputational risks for plantation companies.
A plantation analyst said CPO price volatility is likely to persist in 2026, given the numerous uncertainties facing the agriculture sector and the broader global economy.
Among the key factors to monitor amid the volatility are extreme weather patterns and their impact on yields, global edible‑oil inventories, consumption trends, and changes in biodiesel mandates and policies worldwide.
Affin Hwang IB, which maintains a “neutral” stance on the sector, named Johor Plantations Group Bhd
and Ta Ann Holdings Bhd as its top picks.
“We believe their valuations are attractive, and we currently favour companies with purely Malaysian operations, given the uncertainty surrounding land security in Indonesia,” the research house further added.
